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CIRCULAR No. 27/1998/TT-BTC OF MARCH 4, 1998, GUIDING THE INSURANCE EXPLOITATION ACTIVITIES AND PREMIUM MANAGEMENT

Pursuant to Decree No.100-CP of December 18, 1993 of the Government on the insurance business and Decree No.74-CP of June 14, 1997 amending and supplementing a number of Articles of Decree No.100-CP of December 18, 1993 of the Government on the insurance business;

In order to ensure that the insurance business activities shall be carried out in a healthy competition environment, to enhance the co-ordination and co-operation among insurance enterprises as well as insurance brokerage organizations, to promote the development of insurance market, and better serve insurance needs of the economy and the society, the Ministry of Finance hereby guides the insurance exploitation and premium management as follows:

I. GENERAL PROVISIONS

Subject to this Circular shall be the insurance enterprises and insurance brokerage organizations, which are licenced to be established and operate lawfully in Vietnam; insurance agents and collaborators, that have signed insurance agency and collaborator contracts with insurance enterprises.

In this Circular, the insurance exploitation activities are construed as activities of propagating, advertising, mobilizing customers to take part in insurance, selling insurance products, which are carried out directly by insurance enterprises or through agents, insurance collaborators and/or insurance brokerage organizations.

The scope of premium management defined in this Circular includes the premium index, premium rates applied directly by insurance enterprises or indirectly through agents, insurance collaborators and/or insurance brokerage organizations to all insurance business services arising and carried out in Vietnam.

II. SPECIFIC PROVISIONS

1. Specific provisions on insurance exploitation:

1.1. Advertising and propagating activities:

Insurance enterprises and insurance brokerage organizations shall be entitled to carry out advertisement and propagation forms suitable to the current provisions of law in order to make the public understand the functions and effects of taking part in insurance and to have knowledge about the insurance enterprises, insurance brokerage organizations and insurance products as well as relevant services provided by insurance enterprises.

Propagating and advertising information must be truthful information reflecting accurately the situation of concerned insurance enterprises and/or insurance brokerage organizations, such as: financial status, business operation, organizational structure, executive apparatus, kinds of insurance products to be provided. It is strictly forbidden to use inaccurate information in order to secure services and abuse the trust of the insured.

Insurance enterprises agents, collaborators and/or brokerage organizations are not allowed to propagate and advertise any information relating to other insurance enterprises and/or insurance brokerage organizations, except for cases where it is so agreed in writing by such insurance enterprises and/or insurance brokerage organizations.

Insurance enterprises, brokerage organizations, agents and/or collaborators are strictly forbidden to give inaccurate information about financial status; contents, scope and field of operations of the insurance enterprises and/or insurance brokerage organizations; and about the insurance regulations, terms, premium index and/or insurance commissions.

In cases where advertising and propagating contents fail to conform with the provisions of law, the contents of the regulations, and/or with the insurance terms, thus leading to any disputes with the insured person(s), such insured person(s) will be eligible for the settlement under the best terms.

1.2. Direct sale of insurance:

Within the scope of their business operation, insurance enterprises shall take initiative in mobilizing customers to take part in insurance. The mobilization of customers to take part in insurance is done directly with the customers or their representatives.

Insurance enterprises are strictly forbidden to force, through organizations and/or individuals, the insurance purchase in any forms, thus affecting the legitimate interests of the insured.

Joint stock insurance companies are strictly forbidden to force their shareholders to buy insurance at their own companies.

1.3. Sale of insurance through insurance agents, collaborators, and/or brokerage organizations:

Insurance enterprises may authorize their agents, and/or collaborators to sell insurance products within their permitted scope of insurance operation. The rights and obligations of insurance enterprises, agents and collaborators are defined in the insurance agency or collaborator contracts signed between the insurance enterprises and the relevant agents or collaborators.

Insurance brokerage organizations shall represent the customers, guide and advise them to take part in insurance so as to secure their best insurance benefits.

Insurance agents, collaborators and brokerage organizations must not prevent the insured from providing necessary information or influence them not to provide such information or to provide false information for insurance enterprises.

Insurance agents, collaborators and brokerage organizations shall have to explain all information on the insurance products so that the insured persons may clearly understand the insurance products which they plan to buy or have already bought.

Insurance agents, collaborators and brokerage organizations shall have to keep secret all information provided by customers, which are related to their insurance transactions.

1.4. Sale of insurance through tender:

- Bases for considering tenders shall be the tender soliciting documents, tables of insurance premium offers and relevant service prices.

- Bidding must be organized openly and bidding conditions shall be applied to all insurance enterprises participating in the bidding.

- Insurance enterprises' bidding dossiers must clearly state the insurance conditions, terms, regulations, premium tables and other regulations, as required by the bid-soliciting documents.

2. Specific regulations on management of insurance premium:

2.1. In the course of their business operations, insurance enterprises shall have to comply with the regulations on the management of insurance premium as follows:

a/ For compulsory insurance operations, the insurance enterprises shall have to abide by the regulations, premium tables or brackets promulgated by the Ministry of Finance.

b/ For insurance operations related to human being, the enterprises shall have to submit their premium tables to the Ministry of Finance for approval before their application.

c/ For other insurance operations, the insurance enterprises shall have to register with the Ministry of Finance before their application.

2.2. When determining the premium rate, apart from the compulsory insurance operations stipulated in Point (a) Clause 2.1 Section 2 above, the insurance enterprises may calculate the insurance premiums themselves or based on the premium index of the international insurance market after making adjustments suitable to the actual situation of Vietnam and of their enterprises under the principle of calculating the insurance premiums in Clause 2.3 hereunder:

2.3. When calculating insurance premiums, the insurance enterprises shall have to comply with the following principles;

- Insurance premium must be compatible with the socio-economic conditions in the country and the customers' capability.

- Insurance premiums must correspond with the insurance conditions and responsibilities.

- Insurance premiums must accurately and fully cover all business operation expenses and prescribed reserves with the business results of insurance enterprises being taken into account.

2.4. Procedures for submitting and registering premium tables with the Ministry of Finance.

When submitting or registering their premium tables with the Ministry of Finance, the insurance enterprises shall have to provide the premium table expected to apply and all relevant information as follows:

+ Statistical data on compensation and loss situation in at least 3 previous years (for newly set-up insurance enterprises, a plan for such business operations in 3 following years is required) and general trend of loss in the future, with the cycles of big loss (if any) being taken into account.

+ Business, management expenses.

+ Payable tax amounts.

Within 30 days from the date of receiving the full and valid dossiers, the Ministry of Finance shall reply in writing about the applications of the premium tables which have been submitted or registered.

2.5. Insurance enterprises, agents, collaborators, and brokerage organizations shall have to comply with the premium table promulgated by the Ministry of Finance and the premium tables submitted or registered by insurance enterprises and approved by the Ministry of Finance.

2.6. The Ministry of Finance guarantees to keep secret all information related to the premium tables submitted or registered with it by insurance enterprises.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect 15 days after its signing.

Any insurance enterprises, agents, collaborators or brokerage organizations that violate the provisions of this Circular shall be administratively sanctioned or examined for penal liability, depending on the seriousness of their violations.

Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for consideration, supplement or amendment.

For the Minister of Finance

Vice-Minister

LE THI BANG TAM